Why did Target fail in Canada? Here’s the real reason

A Target store in Brossard, Quebec. What Caused the Target Canada failure?

Target is currently wrapping up an expensive and embarrassing Canadian experiment. A liquidation of the company’s assets has been underway for nearly two months, and snapshots of its increasingly barren shelves have been a mainstay of media coverage since February.

The U.S. retail giant decided to enter Canada in 2011, with the purchase of 220 Zellers locations for approximately $1.8 billion. It is now leaving with a more than (U.S.) $2-billion hole in its balance sheet.

What went wrong? Why did Target fail in Canada?

Ivey Business School marketing professor Kersi Antia said Target made some clear mistakes upon entering the Canadian market.

“The plan to open so many stores in such a short period resulted from an opportunistic takeover of Zellers, which came back to bite them in the butt because it was too aggressive,” he says. “And instead of taking time to really understand our market, Target acted like it wasn’t even expanding across a border. The company entered Canada as if it was the 51st state. These mistakes cost them dearly.”

But one major reason Target failed in Canada gets almost no ink. It’s the varied delights of cross-border shopping.

The cross-border shopping trip has slowly evolved into a Canadian tradition. Of course, prices are often cited as a big reason for this. But many Canadians have come to include shopping as part of the experience of their U.S. trip, or the other way around.

“We have to remember there are many reasons why Canadians love to cross-border shop and only one of those reasons is to save money,” Antonia Mantonakis, a consumer behaviour researcher at Brock University, told The Star recently. “Part of why Canadians love cross-border shopping is the experience of it all. Taking a road trip with friends and family, stopping off for some Buffalo wings, going to the big malls, visiting stores we don’t have in Canada, seeing the different options.”

According to a report from Stats Canada, overnight trips accounted for 45.3% of the goods brought into our country from the U.S. in 2012, compared to 38.9% by mail and just 10.5% from same-day trips.

About three quarters of Canadians live within 160 kilometres of the U.S. border and the amount of stuff we are allowed to bring back has consistently increased. Of course, if we stay a little longer we can bring more stuff back, and this is an increasingly popular option with Canucks.

According to a report from Stats Canada, overnight trips accounted for 45.3% of the goods brought into our country from the U.S. in 2012, compared to 38.9% by mail and just 10.5% from same-day trips.

Talk to most any Canadian and they will tell you they save up or delay the purchase of some things for a trip to the States and make a mini-vacation of it. Increasingly, we are tacking on shopping to a list of activities that may include Disneyland or Las Vegas or a Tampa Bay Lightning hockey game.

And hit the liquor section of any Costco in a U.S. destination and you’ll find snowbirds; they’re the ones raving about the low cost of a pint of Bacardi rum or a bottle of J. Lohr Cabernet Sauvignon.

Canadians love the novelty of shopping at stores we don’t have for things we don’t get north of the border, from a cheeseburger at In-N-Out Burger to a pair of shoes at Nordstrom Rack, or even groceries at Trader Joes.

“You all been there,” says the page’s “About” section. “The main stay of this town “guide meridian” is LA freeway at rush hour. Its hard to find a parking spot. The lines are crazy. The overcrowding is causing some to be rude. We just want to go shopping like everyone else, not go on an adventure. Costco and other big box companys (sic) in this area need to be allowed to expand or move to larger areas. Bellingham Coscto is in the top ten profitable Costcos but is still top ten smallest stores. What are your ideas? lets make this known so that the city/county officials know that the people want change so we can better accommodate our Canadians neighbors and our own shopping situations.”

About Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

I think there is some validity to the argument above, but Target still should have been able to succeed here.

Among the many problems that contributed to this failure, was the fact that we Canadians set unrealistic expectations on Target right from the get-go. Even though the dollar was far closer to par than it is now,(could it be further?), the costs we have in Canada would never allow for equal pricing on both sides of the border. Wages alone are so much higher. And population fixes everything. We could never supply the volume of sales that can supply product at the retails they have i their US stores.

I think Target tried to create something new and a little different from their American stores, but for most Canadians it just wasn’t what they wanted, or wasn’t believable enough. We wanted the same deals as the US stores.

As far as the people they hired, I’ve been in Canadian retail for over 20 years and they hired some of the finest I know and spared no expense whatsoever. I totally admire what they tried to do.

The message that comes out of all of this is that for most Canadians, not me, but most Canadians, is that Walmart and Superstore are good enough. It’s too bad. I think theTarget experience, if they had eventually managed to get it right, would have brought better product, a better shopping experience, and much-needed competition to the Canadian market.

Don’t buy it. The reason Target failed is they thought Canadian and US were the same market and therefore no effort required to start the business in Canada. Important lesson learned – although Canada looks a lot a like the US on the surface, it’s a very different country, population, market and culture. Target “called it in” and didn’t put the basic elements in place to run a successful business (staff, inventory, competition, etc). They thought they could ride the coattails of the US operation. Fail.

Another huge gaffe by Target was closing the old Zeller’s stores for weeks while the renovations were being done. Wal-Mart kept the old Woolco store’s open while they the changes. Customers wanted to see how Wal-Mart operated and they also found it interesting to see the reno’s were progressing. The end result was that Wal-Mart made money from the get-go and people did not have to go elsewhere. The big difference of course was that Wal-Mart delivered with their US reputation and Target did not.
The people who paid the price for this colossal Target failure were the employees who were thrown out of work….and apparently not the Target head Office people who were behind this whole mess.

The only time I went to Target, I found it had Walmart items for premium store prices. Even Zellers wasn’t THAT expensive. That was the baseline of the problem, Canadians were expected a low cost outlet store (like Target USA, Walmart, etc) and instead got a store that was a carbon copy of ‘Winners’ or ‘The Bay’

makemine: I think most people in Canada wanted Target to succeed. More competition, especially for Wal-Mart. But as soon as people checked out the stores they had the same reaction….”it’s not what I expected, too many empty shelves, no deals and regardless…nothing here that I want to buy. I like the US stores better so why should I come back”

Some interesting feedback there, and I think you’re right, the initial hope people had was optimistic, but there was no foot traffic to drive it. Even at the beginning. And “not what I expected” has a lot to do with the fact that people expected too much

And I didn’t hear the CEO’s negative comments about us, I’m saying he is partly correct, though they also own a huge part of this too.

Apart form the lack of items on the shelves I personally found many things there that I couldn’t find elsewhere at the same price. And good deals too. I purchased a large television there, lots of clothing and so on. All priced competitively too. Not ridiculous cheap but no complaints from me.

And what about the stores? They spent so much money creating those beautiful stores. As I mentioned in my previous response, they spared no expense on that front either which I admire them for. They made many, if not all of their facilities LEED-certified too which is also to be commended.

Some categories, like in the US, they really did a great job. Their holiday decor was very well done.

I think in the end here it was us who didn’t ‘get it’. Unrealistic expectations and lots of fumbles by Target too.

It also says a lot about our typical shopper as well. We’re different, no doubt.

You’re mistaken. Wal-Mart did not make money from the get-go. They made similar gaffes.

They refused to do sale pricing initially and only after lots of pressure – and lost sales – did they finally relent and play along with the other Canadian retailers by having a weekly sale flyer. A huge additional cost for them but it payed off.

The amount of work that needed to be done on the vast majority of old and tired Zellers stores – (I know the guy who was in charge of maintaining all of them), would not have allowed Target to open the type of store they opened by staying open throughout renovations.

They also would have had to deal with the existing workforce in that sort of scenario which was a no-go for them.

Fortunately what was a deal in the US is still a deal in the US. Virtuay all of the Canadian importers have already passed on their higher costs to the retailers who have, in turn, passed it on with the obligatory “uplift” to the Canadian consumer. We can all be sure that when and if the loonie gains ground on the US dollar these higher prices will stay the same. Just picked up some Cree LED lights at Home Depot US for $4.79 ea same “energy saving” product that we are being told to convert to are $12.97 at Home Depot in Canada, almost 300% – such a deal!

The stores were pleasant and very well maintained. But I would question your comment about “…..us who didn’t get it”. I still believe the customer is always right. I visited several Target stores in the GTA in the first few months they were open. At all different times of the day and evening. At a couple of them I swore I was the only customer there. If ever was a time a new store chain should have been busy it was then. I visited the Target in Whitby on Taunton Road twice because I was in the area. The parking lot was deserted both times…once in the afternoon and once in the early evening. How on earth can that have happened? The stampede away from Target was a real shock to me.The Wal-Mart at the Oshawa end of Taunton Road was, as usual, packed with shoppers. I wondered how such a large company could blow things so badly.The only thing I ever bought was a shirt but there was nothing else of interest. I preferred Zeller’s with all of it’s faults. Bigger variety of merchandise, restaurant and reasonably good prices. Now we are all stuck with Wal-Mart for a main department store…which means a whole lot less choice for us all.

I said it from the onset. Target thought that by blowing off all of the former Zellers Staff and Management they were the true kings of retail. Wrong! Just plain poor decisions. People might like to think that Zellers was worn and tired. Also not true. Yes, Zellers could not pour the dollars into their stores like Walmart, but they were competitive. On any given day the cart dollar was within a couple of bucks. Did people notice this? NO! Because they have it in their minds that Walmart is cheaper. This was not true. Target made so many mistakes it is unbelievable they could have gotten themselves into such a mess. You don’t team up with Sobey’s to supply your fresh products. They are nearly the most expensive out there. Plain dumb. Too bad posts are not able to be retrieved from when this gong show came to Canada. I don’t want to boast, but predicted this failure right from the beginning.

Also for your information. If you look at the list of creditors who are owed money from Target Canada; Sobeys ranks up pretty high as they bought their expensively high products and could not afford to pay them.

This is not the reason, in my opinion. Not everyone in Canada lives close to a border. If that was the case, no stores would be successful. I don’t know about the rest of Canada but here in Alberta its because of empty shelves. Lack of items to buy. Simple as that. I loved the store, nice big aisles, nice and clean, Starbucks included.

The quality of the goods in the store was very cheap.. I would not buy and did not buy a thing in that store . GET some good quality items and clothing that will keep your customers coming back and spending money.. It is not only Target but Wal-Mart is the same .We use to have great shopping centers with good quality items in them go back to those days please and thank you……..
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When target opened where I live in Canada, it was a joke price wise especially. When it went down there were no sad faces on anyone I knew.In fact, we laughed at their fail and went shopping at Walmart were the T-shirt were 5-10$ and higher instead of an unreasonable 15-20 and higher. Not only that but Zellers was a well loved store.Yes,nobody (including me) shopped there more than a couple times a year but when you did you thought “This is Canadian and also really cheap”. The Target replaced the Canadian store with an American one and there was an over all sense of “Oh great, here comes another American store replacing a Canadian one”. Walmart is American too, but it has made sure to build a Canadian sense.Target didn’t try to appeal to Canadians.Like the article said, they acted like they didn’t cross a boarder.Although, I have to say thanks to Target for my water bottle.I bought a really nice pink water bottle there when their prices got reasonable around closing time, and I love it.